The SBA found the awardee was affiliated with a company acquired by the awardee’s parent. The awardee argued it was not affiliated because the acquisition was consummated after the proposal deadline. Applying the “present effect” rule, however, OHA found the acquisition became effective before the awardee submitted a proposal.
Size Appeal of FRM Socks, LLC, SBA No. SIZ-6281
- Size Determination – The agency awarded a small business set aside contract. The contract had a size standard of 850 employees. The SBA Area Office initiated its own size protest. The Area Office found the awardee was not small. The awardee was affiliated with several businesses. When the affiliates’ employees were added to the awardee’s, the total exceeded the 850 standard.
- Appeal – The awardee appealed to OHA. The awardee argued the Area Office wrongly included an affiliate in the size calculation. The Area Office had included a company acquired by the awardee’s parent. But the acquisition had occurred after the awardee had submitted its proposal. So, the awardee argued, the acquired company was not affiliated with the awardee when it submitted its proposal.
- Present Effect Rule – OHA found the “present effect” rule governed. Under that rule, a merger or acquisition is effective as of the date that an agreement in principle was reached even though the actual transaction is not consummated.
- Agreement in Principle – The awardee argued in various ways that an agreement in principle had not been reached before proposal submission. The awardee argued the parties still had to do due diligence and work out financing before proposal submission. But OHA rejected the awardee’s arguments. The parties had executed a Term Sheet. That sheet showed the awardee’s parent intended and agreed to the acquisition before the awardee submitted a proposal. The acquired company was an affiliate. The awardee was not small.
The protester is represented by Frank S. Murray of Foley & Lardner LLP.
–Case summary by Craig LaChance, Editor in Chief
